Monday, December 5, 2011

Statement of principles to be (finally) amended (?)

Many readers will be aware of the full Federal Court decision earlier this year of Clark.

In that case, the Court largely reiterated the decision from 10 years ago in Commercial Nominees that, generally speaking, a resettlement of a trust for tax purposes can only happen in a very limited range of circumstances.

At the end of last week, the Tax Office released a decision impact statement in relation to the Clark decision and has, finally, accepted that the position set out in the case may mean that the 'Creation of a New Trust – Statement of Principles' last updated in August 2001, may need to be changed.

A previous post links the Statement of Principles for those that have not seen it, and in that document, the Tax Office suggests that there are in fact quite a large range of situations where a trust may be resettled for tax purposes.

It is hoped that the Tax Office can prioritise providing some clarity around their position on trust resettlements, particularly given that most specialist advisers in this area believe that, in accordance with Commercial Nominees and Clark, significant changes should be able to be made to trust deeds without triggering a resettlement.